HUIXIAN

YOU might think that, for the poorest households here, the bulk of their spending would be on truly essential items - and thus would be hit by the GST increase.

But Second Finance Minister Tharman Shanmugaratnam, armed with figures from the Household Expenditure Survey 2002/2003, sought to set the record right in Parliament yesterday.

Just 5 per cent of the poorest 20 per cent of households' spending falls within the most-commonly cited basket of essential items: rice, salt, sugar, edible oil, soy sauce and (uncooked) vegetables, flour and fish.


Other uncooked food accounted for 9 per cent; utilities and public transport, another 13 per cent.

Grand total: About a quarter of their spending.

The survey was based on household income.

The broader significance?

In the wake of the 2 per cent GST increase, some MPs had noted that the relief offered by the Government's $4 billion offset package would eventually expire.

A 'more permanent' solution, Mr Inderjit Singh (Ang Mo Kio GRC) suggested, was to zero-rate food and other essentials.

But yesterday, Mr Tharman said zero-rating was 'not a good way, an effective way of helping the poor' because 'most of the spending of lower-income households is, in fact, not on essentials'.

Apart from food, Mr Inderjit had also mentioned items like housing, medical costs and school fees.

These make up 30 per cent of the poorest households' spending, according to Mr Tharman.

But these were already exempt from GST, he pointed out.

The largest chunk of expenditure, or 45 per cent, went on 'other items', including 'clothing, recreation and cooked food'.

Another point Mr Tharman made was that, 'if you exempt essentials, it will mean that GST on the rest of the items, the non-essentials, will have to be higher.'

This would hit the middle-income group particularly hard, he said.


HARD TO IMPLEMENT

Australia, which exempts essential foods, has a GST rate of 10. Ireland exempts food but has '21 per cent GST on the rest of the expenditure basket'.

Finally, Mr Tharman noted that a multi-tiered GST system would be arbitrary and hard to implement.

'What the Government decides to be an essential item is something which will move over time,' he said.

'Countries that start by exempting a few essential food items end up by expanding these definitions... to whole categories of items.'

finaldust

went on 'other items', including 'clothing, recreation and cooked food'.
-.- think most poor household r a bit much richer bah that why they can afford to spend on somewhere else

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